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Low volatility of high volatility?

Goldman Sachs says that hedging against a market crash is the cheapest in more than five years. The chart below shows the cost of a rolling SPX 1 month 3% OTM put: the current cost is 34 basis points, the lowest level in 5 years.

Is this likely to continue in 2024? Or is it just the calm before the storm?

Otavio Costa states that the lagging effects of monetary policy are about to start impacting financial markets. With a 2-year lead, changes in Fed funds rates have often foreshadowed significant volatility events in equity markets. The current narrowing leadership in the stock market, coupled with numerous recession indicators sounding alarms, supports the argument that volatility is currently unsustainably suppressed.

Sources: Goldman Sachs, TME, Otavio Costa

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